x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31, 2009
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OR
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Illinois
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36-2848943
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(State
or other jurisdiction of
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(I.R.S.
Employer Identification Number)
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incorporation
or organization)
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22160
N. Pepper Road
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Lake
Barrington, Illinois
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60010
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(Address
of principal executive offices)
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(Zip
Code)
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Title of Each Class
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Name of Each Exchange on Which
Registered
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Common
Stock, No Par
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NASDAQ
Capital Market
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Part
of Form 10-K into Which
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||
Document
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Document Is Incorporated
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Sections
of the registrant’s Proxy Statement
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Part
III
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To
be filed on or before April 30, 2010 for the
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||
Annual
Meeting of Stockholders
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FORWARD
LOOKING STATEMENTS
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||
Part
I
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||
Item
No. 1
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Description
of Business
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1
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Item No. 1B
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Unresolved
Staff Comments
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13
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Item
No. 2
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Properties
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13
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Item
No. 3
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Legal
Proceedings
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14
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Part
II
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||
Item
No. 5
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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14
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Item
No. 7
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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15
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Item No. 7A
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Quantitative
and Qualitative Disclosures Regarding Market Risk
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25
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Item
No. 8
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Financial
Statements and Supplementary Data
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25
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Item
No. 9
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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26
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Item
No. 9A
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Controls
and Procedures
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26
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Item
No. 9B
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Other
Information
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27
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Part
III
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||
Item
No. 10
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Directors
and Executive Officers of the Registrant
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27
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Item
No. 11
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Executive
Compensation
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27
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Item
No. 12
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Security
Ownership of Certain Beneficial Owners and and Management and Related
Stockholder Matters
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27
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Item
No. 13
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Certain
Relationships and Related Transactions
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27
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Item
No. 14
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Principal
Accounting Fees and Services
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28
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Part
IV
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||
Item
No. 15
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Exhibits
and Financial Statement Schedules
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28
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·
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Novelty Products,
principally balloons, including foil balloons, latex balloons, punch balls
and other inflatable toy items,
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|
·
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Flexible Containers for
home and consumer use for the storage and preservation of food and
personal items,
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·
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Flexible Films for food
and other packaging and commercial applications,
and,
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|
·
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Specialty Film Products
of unique design for various applications including for medical
uses.
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·
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Coating
and laminating plastic film. Generally, we adhere polyethylene
film to another film such as nylon or
polyester.
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|
·
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Printing
plastic film and latex balloons. We print films, both plastic
and latex with a variety of graphics for use as packaging film or for
balloons.
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·
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Converting
printed plastic film to balloons.
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·
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Converting
plastic film to flexible
containers.
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·
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Producing
latex balloons and other latex novelty
items.
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·
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Novelty
Products
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66.6%
of revenues
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·
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Film
Products
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16.7%
of revenues
|
·
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Flexible
Containers
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16.7%
of revenues
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|
·
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Focus on our Core Assets and
Expertise. We have been engaged in the development,
production and sale of film products for 34 years and have developed
assets, technology and expertise which, we believe, enable us to develop,
manufacture, market and sell innovative products of high quality within
our area of knowledge and expertise. We plan to focus our
efforts in these areas which are our core assets and expertise – laminated
films, printed films, pouches, specialty film products and film novelty
products – to develop new products, to market and sell our products and to
build our revenues.
|
|
·
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Maintain a Focus on Margin
Levels and Cost Controls in Order to Establish and Maintain
Profitability. We engage in constant review and effort
to control our production, and our selling, general and administrative
expenses, in order to establish and enhance
profitability.
|
|
·
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Develop New Products, Product
Improvements and Technologies. We work to develop new
products, to improve existing products and to develop new technologies
within our core product areas, in order to enhance our competitive
position and our sales. We seek to leverage our technology to
develop innovative and proprietary products. In the novelty
line, our development work includes new designs, new character licenses
and new product developments. In our commercial line, over the
past several years we have developed new pouch closure systems and valves
and new film methods for liquid packaging applications. We have
received eleven patents for these developments and have four patent
applications pending. During 2008, we
introduced a line of resealable pouches with a valve and pump system for
household storage and vacuum sealing of food items. We work
with customers to develop custom film products which serve the unique
needs or requirements of the customer. Recently, we have
participated in the development of, and are now producing a new product
for a medical application.
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|
·
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Develop New Channels of
Distribution and New Sales Relationships. In order to
increase sales, we endeavor to develop new channels of distribution and
new sales relationships, both for existing and new products. On
February 1, 2008, we entered into a Supply and License Agreement with S.C.
Johnson & Son, Inc. to manufacture and supply to SC Johnson certain
home food management products to be sold under the SC Johnson ZipLoc®
brand. During 2009, we developed new distributors and customers
for our pouch products and for novelty products in Europe, Australia and
New Zealand.
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·
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Superloons® -
18" foil balloons in round or heart shape, generally made to be filled
with helium and remain buoyant for long periods. This is the predominant
foil balloon size.
|
|
·
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Ultraloons® -
31" jumbo foil balloons made to be filled with helium and remain
buoyant.
|
|
·
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Miniloons®-
9" foil balloons made to be air-filled and sold on holder-sticks or for
use in decorations.
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·
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Card-B-Loons®-
(4 1/2") air-filled foil balloons, often sold on a stick, used in
floral arrangements or with a container of
candy.
|
|
·
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Shape-A-Loons® -
“18 to 48” shaped foil balloons made to be filled with
helium.
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|
·
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Minishapes
– 11” to 16” small shaped foil balloons designed to be air filled and sold
on sticks as toys or inflated
characters.
|
|
·
|
Balloon
JamzTM –
20” to 40” round and shaped foil balloons which emit and amplify sound
through a speaker attached to the
balloon.
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United
States
|
United
Kingdom
|
Mexico
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Consolidated
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|||||||||||||
Year
ended 12/31/09
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||||||||||||||||
Sales
to outside customers
|
$ | 31,873,000 | $ | 1,971,000 | $ | 7,451,000 | $ | 41,295,000 | ||||||||
Total
Assets
|
$ | 23,801,000 | $ | 733,000 | $ | 5,861,000 | $ | 30,395,000 | ||||||||
United
States
|
United
Kingdom
|
Mexico
|
Consolidated
|
|||||||||||||
Year
ended 12/31/08
|
||||||||||||||||
Sales
to outside customers
|
$ | 34,701,000 | $ | 2,762,000 | $ | 7,518,000 | $ | 44,981,000 | ||||||||
Total
Assets
|
$ | 24,709,000 | $ | 740,000 | $ | 4,539,000 | $ | 29,988,000 |
High
|
Low
|
|||||
January
1, 2008 to March 31, 2008
|
$6.43
|
$3.25 | ||||
April
1, 2008 to June 30, 2008
|
6.10 | 4.16 | ||||
July
1, 2008 to September 30, 2008
|
7.30 | 4.50 | ||||
October
1, 2008 to December 31, 2008
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5.29 | 1.60 | ||||
January
1, 2009 to March 31, 2009
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2.65 | 1.20 | ||||
April
1, 2009 to June 30, 2009
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2.50 | 1.23 | ||||
July
1, 2009 to September 30, 2009
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2.65 | 1.75 | ||||
October
1, 2009 to December 31, 2009
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2.84 | 1.95 |
(000
Omitted)
|
||||||||||
$
|
% of
|
$
|
% of
|
|||||||
Product
Category
|
2009
|
Net Sales
|
2008
|
Net
Sales
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||||||
Metalized
Balloons
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19,824
|
48.0%
|
17,629
|
|
39.2%
|
|||||
Film
Products
|
6,913
|
|
16.7%
|
8,212
|
|
18.3%
|
||||
Pouches
|
6,895
|
|
16.7%
|
10,893
|
|
24.2%
|
||||
|
||||||||||
Latex
Balloons
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7,024
|
|
17.0%
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7,597
|
|
16.9%
|
||||
|
||||||||||
Helium/Other
|
639
|
|
1.6%
|
650
|
|
1.4%
|
||||
Total
|
41,295
|
|
100.0%
|
44,981
|
|
100.0%
|
Customer
|
Product
|
2009 Sales
|
% of 2009
Revenues
|
2008 Sales
|
% of 2008
Revenues
|
|||||||||||||
Dollar
Tree Stores
|
Balloons
|
$ | 11,437,000 |
27.7%
|
$ | 9,014,000 |
20.0%
|
|||||||||||
Rapak
L.L.C
|
Films
|
$ | 6,360,000 |
15.4%
|
$ | 7,608,000 |
16.9%
|
|||||||||||
S.C.
Johnson & Son, Inc
|
Pouches
|
$ | 4,583,000 |
11.1%
|
$ | 6,990,000 |
15.5%
|
Year
ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Net
sales
|
100.0%
|
100.0% | ||||||
Costs
and expenses:
|
||||||||
Cost
of products sold
|
77.7 | 77.1 | ||||||
Operating
Expenses
|
16.9 | 17.6 | ||||||
Income
from operations
|
5.4 | 5.3 | ||||||
Interest
expense
|
(2.7) | (2.3) | ||||||
Other
income
|
0.0 | 0.1 | ||||||
Income
before income taxes
|
2.7 | 3.1 | ||||||
Provision
for income taxes
|
0.3 | 0.5 | ||||||
Net
profit
|
2.4% | 2.6% |
|
·
|
Depreciation
and amortization of $1,958,000
|
|
·
|
A
decrease in net inventory of
$948,000
|
|
·
|
An
increase in accounts receivable of
$1,411,000
|
|
·
|
An
increase in prepaid expenses and other assets of
$283,000
|
|
·
|
An
increase in accrued liabilities of
$588,000
|
|
·
|
Restrictive
Covenants: The Loan Agreement includes several
restrictive covenants under which we are prohibited from, or restricted in
our ability to:
|
|
o
|
Borrow
money;
|
|
o
|
Pay
dividends and make distributions;
|
|
o
|
Issue
stock;
|
|
o
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Make
certain investments;
|
|
o
|
Use
assets as security in other
transactions;
|
|
o
|
Create
liens;
|
|
o
|
Enter
into affiliate transactions;
|
|
o
|
Merge
or consolidate; or
|
|
o
|
Transfer
and sell assets.
|
|
·
|
Financial
Covenants: The loan agreement includes a series of
financial covenants we are required to meet
including:
|
|
o
|
We
are required to maintain a tangible net worth in excess of
$3,500,000;
|
|
o
|
We
are required to maintain specified ratios of senior debt to EBITDA on an
annual basis and determined quarterly commencing as of June 30, 2006;
and,
|
|
o
|
We
are required to maintain a specified level of EBITDA to fixed charges for
the six months ending June 30, 2006, the nine months ending September 30,
2006 and twelve months thereafter.
|
When Senior Debt to EBITDA is:
|
The Premium
to the Prime
Rate is:
|
|||
Greater
or equal to 4.00 to 1.00
|
1.50 | % | ||
Greater
than or equal to 3.50 to 1.00; Less than 4.00 to 1.00
|
1.25 | % | ||
Greater
than or equal to 3.25 to 1.00; Less than 3.50 to 1.00
|
1.00 | % | ||
Greater
than or equal to 2.75 to 1.00; Less than 3.25 to 1.00
|
0.75 | % | ||
Less
than 2.75 to 1.00
|
0.50 | % |
|
1.
|
The
Consolidated Financial Statements filed as part of this report on Form
10-K are listed on the accompanying Index to Consolidated Financial
Statements and Consolidated Financial Statement
Schedules.
|
|
2.
|
Financial
schedules required to be filed by Item 8 of this form, and by Item 15(d)
below:
|
|
3.
|
Exhibits:
|
Exhibit
|
||
Number
|
Document
|
|
3.1
|
Third
Restated Certificate of Incorporation of CTI Industries Corporation
(Incorporated by reference to Exhibit A contained in Registrant’s Schedule
14A Definitive Proxy Statement for solicitation of written consent of
shareholders, as filed with the Commission on October 25,
1999)
|
|
3.2
|
By-Laws
of CTI Industries Corporation (Incorporated by reference to Exhibits,
contained in Registrant’s Form SB-2 Registration Statement (File No.
333-31969) effective November 5, 1997)
|
|
4.1
|
Form
of CTI Industries Corporation’s common stock certificate (Incorporated by
reference to Exhibits, contained in Registrant’s Form SB-2 Registration
Statement (File No. 333-31969) effective November 5,
1997)
|
|
10.1
|
CTI
Industries Corporation 1999 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on March 26,
1999)
|
|
10.2
|
CTI
Industries Corporation 2001 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on May 21,
2001)
|
10.3
|
CTI
Industries Corporation 2002 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on May 15,
2002)
|
|
10.4
|
CTI
Industries Corporation 2007 Stock Incentive Plan (Incorporated by
reference to Exhibit contained in Registrant’s Schedule 14A Definitive
Proxy Statement, as filed with the Commission on April 30,
2007)
|
|
10.5
|
Employment
Agreement dated June 30, 1997, between CTI Industries Corporation and
Howard W. Schwan (Incorporated by reference to Exhibits, contained in
Registrant’s Form SB-2 Registration Statement (File No. 333-31969)
effective November 5, 1997.)
|
|
10.6
|
Warrant
dated July 17, 2001 to purchase 79,364 shares of Common Stock John H.
Schwan (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.7
|
Warrant
dated July 17, 2001 to purchase 39,683 shares of Common Stock Stephen M.
Merrick (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.8
|
Note
dated January 28, 2003, CTI Industries Corporation to Stephen M. Merrick
in the sum of $500,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.9
|
Note
dated February 28, 2003, CTI Industries Corporation to Stephen M. Merrick
in the sum of $200,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.10
|
Note
dated February 10, 2003, CTI Industries Corporation to John H. Schwan in
the sum of $150,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.11
|
Note
dated February 15, 2003, CTI Industries Corporation to John Schwan in the
sum of $680,000 (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.12
|
Note
dated March 3, 2003, CTI Industries Corporation to John H. Schwan in the
sum of $100,000 (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.13
|
Warrant
dated March 20, 2003, to purchase 70,000 shares of Common Stock - Stephen
M. Merrick (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.14
|
Warrant
dated March 20, 2003, to purchase 93,000 shares of Common Stock - John H.
Schwan (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.15
|
Loan
and Security Agreement between RBS Citizens, N.A. and the Company dated
February 1, 2006 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
|
10.16
|
Warrant
dated February 1, 2006, to purchase 151,515 shares of Common Stock - John
H. Schwan (Incorporated by reference to Exhibits contained in Registrant’s
Report on Form 8-K dated February 3, 2006)
|
|
10.17
|
Warrant
dated February 1, 2006, to purchase 151,515 shares of Common Stock –
Stephen M. Merrick (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
|
10.18
|
Note
dated February 1, 2006, CTI Industries Corporation to John Schwan in the
sum of $500,000 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
|
10.19
|
Note
dated February 1, 2006, CTI Industries Corporation to Stephen M. Merrick
in the sum of $500,000 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
|
10.20
|
Production
and Supply Agreement between ITW Spacebag and the Company dated March 17,
2006 (Incorporated by reference to Exhibits contained in Registrant’s
Report on Form 8-K dated March 17, 2006)
|
|
10.21
|
License
Agreement between Rapak, LLC and the Company dated April 28, 2006
(Incorporated by reference to Exhibit contained in Registrant’s Report on
Form 8-K dated May 3, 2006)
|
|
10.22
|
Second
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated December 18, 2006 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K dated December 21,
2006.)
|
|
10.23
|
Third
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated November 13, 2007 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 10-Q dated November 13,
2007)
|
|
10.24
|
CTI
Industries Corporation Incentive Compensation Plan (Incorporated by
reference to Exhibit contained in Registrant’s Report on Form 8-K dated
October 2, 2007)
|
|
10.25
|
Supply
and License Agreement among Registrant and S.C. Johnson & Son, Inc.
dated February 1, 2008 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K/A dated March 19,
2008)
|
10.26
|
Agreement
between Babe Winkelman Productions Inc and the Company dated April 10,
2008 (Incorporated by reference to Exhibit contained in Registrant’s
Report on Form 8-K dated April 14, 2008)
|
|
10.27
|
Amendment
to the License Agreement between Rapak, LLC and the Company dated May 6,
2008 (Incorporated by reference to Exhibit contained in Registrant’s
Report on Form 8-K dated May 8, 2008)
|
|
10.28
|
Fifth
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated January 30, 2009 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K dated February 2, 2009)
|
|
10.29
|
Sixth
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated January 26, 2010 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K dated January 29, 2010)
|
|
14
|
Code
of Ethics (Incorporated by reference to Exhibit contained in the
Registrant’s Form 10-K/A Amendment No. 2, as filed with the Commission on
October 8, 2004)
|
|
21
|
Subsidiaries
(description incorporated in Form 10-K under Item No.
1)
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm, Blackman Kallick,
LLP
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as amended (filed
herewith)
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as amended (filed
herewith)
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (filed herewith)
|
(a)
|
The
Exhibits listed in subparagraph (a)(3) of this Item 15 are attached hereto
unless incorporated by reference to a previous
filing.
|
(b)
|
The
Schedule listed in subparagraph (a)(2) of this Item 15 is attached
hereto.
|
CTI
INDUSTRIES CORPORATION
|
|
By:
|
/s/ Howard W. Schwan
|
Howard
W. Schwan, President
|
Signatures
|
Title
|
Date
|
||
/s/ Howard W. Schwan
|
President
and Director
|
March
29, 2010
|
||
Howard
W. Schwan
|
||||
/s/ John H. Schwan
|
Chairman
and Director
|
March
29, 2010
|
||
John
H. Schwan
|
||||
/s/ Stephen M. Merrick
|
Executive
Vice President,
|
March
29, 2010
|
||
Stephen
M. Merrick
|
Secretary,
Chief Financial Officer and Director
|
|||
/s/ Stanley M. Brown
|
Director
|
March
29, 2010
|
||
Stanley
M. Brown
|
||||
/s/ Bret Tayne
|
Director
|
March
29, 2010
|
||
Bret
Tayne
|
||||
/s/ John I. Collins
|
Director
|
March
29, 2010
|
||
John
I. Collins
|
||||
/s/ Phil Roos
|
Director
|
March
29, 2010
|
||
Exhibit
|
||
Number
|
Document
|
|
3.1
|
Third
Restated Certificate of Incorporation of CTI Industries Corporation
(Incorporated by reference to Exhibit A contained in Registrant’s Schedule
14A Definitive Proxy Statement for solicitation of written consent of
shareholders, as filed with the Commission on October 25,
1999)
|
|
3.2
|
By-Laws
of CTI Industries Corporation (Incorporated by reference to Exhibits,
contained in Registrant’s Form SB-2 Registration Statement (File No.
333-31969) effective November 5, 1997)
|
|
4.1
|
Form
of CTI Industries Corporation’s common stock certificate (Incorporated by
reference to Exhibits, contained in Registrant’s Form SB-2 Registration
Statement (File No. 333-31969) effective November 5,
1997)
|
|
10.1
|
CTI
Industries Corporation 1999 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on March 26,
1999)
|
|
10.2
|
CTI
Industries Corporation 2001 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on May 21,
2001)
|
|
10.3
|
CTI
Industries Corporation 2002 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on May 15,
2002)
|
|
10.4
|
CTI
Industries Corporation 2007 Stock Incentive Plan (Incorporated by
reference to Exhibit contained in Registrant’s Schedule 14A Definitive
Proxy Statement, as filed with the Commission on April 30,
2007)
|
|
10.5
|
Employment
Agreement dated June 30, 1997, between CTI Industries Corporation and
Howard W. Schwan (Incorporated by reference to Exhibits, contained in
Registrant’s Form SB-2 Registration Statement (File No. 333-31969)
effective November 5, 1997.)
|
|
10.6
|
Warrant
dated July 17, 2001 to purchase 79,364 shares of Common Stock John H.
Schwan (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.7
|
Warrant
dated July 17, 2001 to purchase 39,683 shares of Common Stock Stephen M.
Merrick (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.8
|
Note
dated January 28, 2003, CTI Industries Corporation to Stephen M. Merrick
in the sum of $500,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.9
|
Note
dated February 28, 2003, CTI Industries Corporation to Stephen M. Merrick
in the sum of $200,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.10
|
Note
dated February 10, 2003, CTI Industries Corporation to John H. Schwan in
the sum of $150,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.11
|
Note
dated February 15, 2003, CTI Industries Corporation to John Schwan in the
sum of $680,000 (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.12
|
Note
dated March 3, 2003, CTI Industries Corporation to John H. Schwan in the
sum of $100,000 (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.13
|
Warrant
dated March 20, 2003, to purchase 70,000 shares of Common Stock - Stephen
M. Merrick (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.14
|
Warrant
dated March 20, 2003, to purchase 93,000 shares of Common Stock - John H.
Schwan (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
|
10.15
|
Loan
and Security Agreement between RBS Citizens, N.A. and the Company dated
February 1, 2006 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
|
10.16
|
Warrant
dated February 1, 2006, to purchase 151,515 shares of Common Stock - John
H. Schwan (Incorporated by reference to Exhibits contained in Registrant’s
Report on Form 8-K dated February 3, 2006)
|
|
10.17
|
Warrant
dated February 1, 2006, to purchase 151,515 shares of Common Stock –
Stephen M. Merrick (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
|
10.18
|
Note
dated February 1, 2006, CTI Industries Corporation to John Schwan in the
sum of $500,000 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3,
2006)
|
10.19
|
Note
dated February 1, 2006, CTI Industries Corporation to Stephen M. Merrick
in the sum of $500,000 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
|
10.20
|
Production
and Supply Agreement between ITW Spacebag and the Company dated March 17,
2006 (Incorporated by reference to Exhibits contained in Registrant’s
Report on Form 8-K dated March 17, 2006)
|
|
10.21
|
License
Agreement between Rapak, LLC and the Company dated April 28, 2006
(Incorporated by reference to Exhibit contained in Registrant’s Report on
Form 8-K dated May 3, 2006)
|
|
10.22
|
Second
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated December 18, 2006 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K dated December 21,
2006.)
|
|
10.23
|
Third
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated November 13, 2007 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 10-Q dated November 13,
2007)
|
|
10.24
|
CTI
Industries Corporation Incentive Compensation Plan (Incorporated by
reference to Exhibit contained in Registrant’s Report on Form 8-K dated
October 2, 2007)
|
|
10.25
|
Supply
and License Agreement among Registrant and S.C. Johnson & Son, Inc.
dated February 1, 2008 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K/A dated March 19, 2008)
|
|
10.26
|
Agreement
between Babe Winkelman Productions Inc and the Company dated April 10,
2008 (Incorporated by reference to Exhibit contained in Registrant’s
Report on Form 8-K dated April 14, 2008)
|
|
10.27
|
Amendment
to the License Agreement between Rapak, LLC and the Company dated May 6,
2008 (Incorporated by reference to Exhibit contained in Registrant’s
Report on Form 8-K dated May 8, 2008)
|
|
10.28
|
Fifth
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated January 30, 2009 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K dated February 2, 2009)
|
|
10.29
|
Sixth
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated January 26, 2010 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K dated January 29, 2010)
|
|
14
|
Code
of Ethics (Incorporated by reference to Exhibit contained in the
Registrant’s Form 10-K/A Amendment No. 2, as filed with the Commission on
October 8, 2004)
|
|
21
|
Subsidiaries
(description incorporated in Form 10-K under Item No.
1)
|
23.1
|
Consent
of Independent Registered Public Accounting Firm, Blackman Kallick,
LLP
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as amended (filed
herewith)
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as amended (filed
herewith)
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (filed herewith)
|
Consolidated
Financial Statements:
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
F-2
|
Consolidated
Statements of Operations for the years ended December 31, 2009 and
2008
|
F-3
|
Consolidated
Statements of Stockholders’ Equity and Comprehensive Income
(Loss) for the years ended December 31, 2009 and 2008
|
F-4
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009 and
2008
|
F-5
|
Notes
to Consolidated Financial Statements for the years ended December 31, 2009
and 2008
|
F-6
|
Financial
Statement Schedule:
|
|
Schedule
II – Valuation and Qualifying Accounts for the years ended December 31,
2009 and 2008
|
F-30
|
December
31, 2009
|
December
31, 2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 870,446 | $ | 180,578 | ||||
Accounts
receivable, (less allowance for doubtful accounts of $57,000 and $39,000,
respectively)
|
7,320,181
|
5,821,593
|
||||||
Inventories,
net
|
9,643,914 | 10,504,769 | ||||||
Net
deferred income tax asset
|
706,754 | 674,872 | ||||||
Prepaid
expenses and other current assets
|
607,127 | 506,225 | ||||||
Total
current assets
|
19,148,422 | 17,688,037 | ||||||
Property,
plant and equipment:
|
||||||||
Machinery
and equipment
|
22,390,891 | 21,612,995 | ||||||
Building
|
3,183,795 | 3,179,909 | ||||||
Office
furniture and equipment
|
2,677,476 | 1,898,642 | ||||||
Intellectual
property
|
345,092 | 345,092 | ||||||
Land
|
250,000 | 250,000 | ||||||
Leasehold
improvements
|
428,864 | 409,797 | ||||||
Fixtures
and equipment at customer locations
|
2,541,881 | 2,539,033 | ||||||
Projects
under construction
|
270,131 | 1,017,737 | ||||||
32,088,130 | 31,253,205 | |||||||
Less
: accumulated depreciation and amortization
|
(22,554,719 | ) | (20,677,223 | ) | ||||
Total
property, plant and equipment, net
|
9,533,411 | 10,575,982 | ||||||
Other
assets:
|
||||||||
Deferred
financing costs, net
|
11,846 | 123,229 | ||||||
Goodwill
|
989,108 | 989,108 | ||||||
Net
deferred income tax asset
|
361,457 | 341,714 | ||||||
Other
assets (due from related party $79,000 and $63,000,
respectively)
|
351,065 | 270,121 | ||||||
Total
other assets
|
1,713,476 | 1,724,172 | ||||||
TOTAL
ASSETS
|
30,395,309 | 29,988,191 | ||||||
LIABILITIES
AND EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Checks
written in excess of bank balance
|
735,257 | 680,348 | ||||||
Trade
payables
|
3,236,607 | 3,153,005 | ||||||
Line
of credit
|
7,598,671 | 7,960,765 | ||||||
Notes
payable - current portion
|
1,111,307 | 1,091,489 | ||||||
Notes
payable - officers, current portion, net of debt discount of $89,000 and
$89,000, respectively
|
1,368,964 | 1,363,255 | ||||||
Accrued
liabilities
|
2,683,714 | 1,973,318 | ||||||
Total
current liabilities
|
16,734,520 | 16,222,180 | ||||||
Long-term
liabilities:
|
||||||||
Notes
Payable - Affiliates
|
780,087 | 894,620 | ||||||
Notes
payable, net of current portion
|
3,108,849 | 4,220,071 | ||||||
Notes
payable - officers, subordinated, net of debt discount of $7,000 and
$96,000, respectively
|
992,632 | 903,964 | ||||||
Total
long-term liabilities
|
4,881,568 | 6,018,655 | ||||||
Equity:
|
||||||||
CTI
Industries Corporation stockholders' equity:
|
||||||||
Preferred
Stock — no par value 2,000,000 shares authorized 0 shares
issued and outstanding
|
$ | - | $ | - | ||||
Common
stock - no par value, 5,000,000 shares authorized, 2,808,720
and 2,808,720 shares issued and 2,738,063 and 2,808,720 outstanding,
respectively
|
3,764,020 | 3,764,020 | ||||||
Paid-in-capital
|
8,693,946 | 8,703,265 | ||||||
Warrants
issued in connection with subordinated debt and bank debt
|
443,313 | 443,313 | ||||||
Accumulated
deficit
|
(2,206,728 | ) | (3,209,868 | ) | ||||
Accumulated
other comprehensive loss
|
(1,803,442 | ) | (1,966,130 | ) | ||||
Less: Treasury
stock, 70,657 shares and 0 shares, respectively
|
(128,446 | ) | - | |||||
Total
CTI Industries Corporation stockholders' equity
|
8,762,663 | 7,734,600 | ||||||
Noncontrolling
interest
|
16,558 | 12,756 | ||||||
Total
Equity
|
8,779,221 | 7,747,356 | ||||||
TOTAL
LIABILITIES AND EQUITY
|
$ | 30,395,309 | $ | 29,988,191 |
For
the Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Net
Sales
|
$ | 41,295,152 | $ | 44,980,674 | ||||
Cost
of Sales
|
32,081,779 | 34,658,271 | ||||||
Gross
profit
|
9,213,373 | 10,322,403 | ||||||
Operating
expenses:
|
||||||||
General
and administrative
|
4,539,494 | 5,375,526 | ||||||
Selling
|
871,258 | 886,391 | ||||||
Advertising
and marketing
|
1,576,225 | 1,677,900 | ||||||
Total
operating expenses
|
6,986,977 | 7,939,817 | ||||||
Income
from operations
|
2,226,396 | 2,382,586 | ||||||
Other
(expense) income:
|
||||||||
Interest
expense
|
(1,102,662 | ) | (1,037,136 | ) | ||||
Interest
income
|
17,555 | 5,679 | ||||||
Foreign
currency (loss) gain
|
(19,956 | ) | 50,003 | |||||
Total
other expense, net
|
(1,105,063 | ) | (981,454 | ) | ||||
Income
before taxes
|
1,121,333 | 1,401,132 | ||||||
Income
tax expense
|
114,391 | 246,779 | ||||||
Net
Income
|
1,006,942 | 1,154,353 | ||||||
Less:
Net income attributable to noncontrolling interest
|
3,802 | 222 | ||||||
Net
income attributable to CTI Industries Corporation
|
$ | 1,003,140 | $ | 1,154,131 | ||||
Other
Comprehensive Income, net of taxes
|
||||||||
Unrealized
gain (loss) on derivative instruments
|
$ | 152,830 | $ | (241,809 | ) | |||
Foreign
currency adjustment
|
$ | 9,858 | $ | (1,123,038 | ) | |||
Comprehensive
income (loss) attributable to CTI Industries Corporation
|
$ | 1,165,828 | $ | (210,716 | ) | |||
Basic
income per common share
|
$ | 0.36 | $ | 0.42 | ||||
Diluted
income per common share
|
$ | 0.36 | $ | 0.40 | ||||
Weighted
average number of shares and equivalent shares of common stock
outstanding:
|
||||||||
Basic
|
2,765,277 | 2,763,017 | ||||||
Diluted
|
2,775,062 | 2,898,681 |
CTI
Industries Corporation
|
||||||||||||||||||||||||||||||||||||||||
Value
of warrants
|
Accumulated
|
|||||||||||||||||||||||||||||||||||||||
issued
in
|
Other
|
Less
|
||||||||||||||||||||||||||||||||||||||
Common
Stock
|
Paid-in
|
connection
with
|
Accumulated
|
Comprehensive
|
Treasury
Stock
|
Noncontrolling
|
||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
subordinated
debt
|
Deficit
|
Loss
|
Shares
|
Amount
|
Interest
|
TOTAL
|
|||||||||||||||||||||||||||||||
Balance,
December 31, 2007
|
2,569,124 | $ | 3,764,020 | $ | 6,754,077 | $ | 1,038,487 | $ | (4,363,999 | ) | $ | (601,283 | ) | - | $ | - | $ | 12,534 | $ | 6,603,836 | ||||||||||||||||||||
Warrants
Exercised
|
163,000 | $ | 793,810 | $ | 793,810 | |||||||||||||||||||||||||||||||||||
Options
Exercised
|
8,357 | $ | 16,775 | $ | 16,775 | |||||||||||||||||||||||||||||||||||
Issue
of warrants related to loan guarantee
|
$ | 126,371 | $ | 126,371 | ||||||||||||||||||||||||||||||||||||
Shares
issued under SEDA agreement (net of issuance costs)
|
18,239 | $ | 94,500 | $ | 94,500 | |||||||||||||||||||||||||||||||||||
Reclass exercised
warrants issued with debt
|
$ | 595,174 | $ | (595,174 | ) | $ | - | |||||||||||||||||||||||||||||||||
Stock
issued for services
|
50,000 | $ | 235,188 | $ | 235,188 | |||||||||||||||||||||||||||||||||||
Compensation
relating to Option Issuance
|
$ | 58,061 | $ | 58,061 | ||||||||||||||||||||||||||||||||||||
Excess
tax benefit - Options
|
$ | 29,309 | $ | 29,309 | ||||||||||||||||||||||||||||||||||||
Net
Income
|
$ | 1,154,131 | $ | 222 | $ | 1,154,353 | ||||||||||||||||||||||||||||||||||
Other
comprehensive income, net of taxes
|
||||||||||||||||||||||||||||||||||||||||
Unrealized
loss on derivative instruments
|
$ | (241,809 | ) | $ | (241,809 | ) | ||||||||||||||||||||||||||||||||||
Foreign
currency translation
|
$ | (1,123,038 | ) | $ | (1,123,038 | ) | ||||||||||||||||||||||||||||||||||
Total
comprehensive loss
|
$ | (210,494 | ) | |||||||||||||||||||||||||||||||||||||
Balance,
December 31, 2008
|
2,808,720 | 3,764,020 | $ | 8,703,265 | $ | 443,313 | $ | (3,209,868 | ) | $ | (1,966,130 | ) | - | - | 12,756 | $ | 7,747,356 | |||||||||||||||||||||||
Adjustment
to stock issued for services in the prior year
|
$ | (96,688 | ) | $ | (96,688 | ) | ||||||||||||||||||||||||||||||||||
Compensation
relating to Option Issuance
|
$ | 87,369 | $ | 87,369 | ||||||||||||||||||||||||||||||||||||
Stock
Buybacks
|